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During a May 2003 congressional hearing, questions were raised about the accuracy of the Department of Veterans Affairs' (VA) reported costs for collecting payments from veterans and private health insurers for its Medical Care Collections Fund (MCCF). Congress also had questions about VA's practice of using third-party collections to satisfy veterans' first-party debt. GAO's objectives were to determine: (1) the accuracy of VA's reported cost for collecting first- and third-party payments from veterans and private health insurers, and (2) how VA's practice of satisfying first-party debt with third-party payments affects the collections process.

VA has not provided guidance to its Chief Business Office and Veterans Integrated Service Networks (VISN) for accounting for the costs associated with collecting payments from veterans and private health insurers. As a result, GAO found that the Chief Business Office and VISNs excluded some costs associated with collecting first- and third-party payments. In addition, GAO found inconsistencies in the way VISNs allocate these costs. Consequently, VA's reported costs to collect are inaccurate. VA's practice of satisfying--or paying for--first-party, or veterans' copayment debt, with collections from third-party insurers has resulted in a reduction in overall collections and increased administrative expenses due to the reconciliation process. VA has taken the position that payments made from third-party insurers should be used to satisfy veterans' first-party debt. The law and legislative history are not clear on whether third-party collections can be used for this purpose.

Recommendation for Executive Action

Status: Closed - Implemented

Comments: On December 15, 2004, the Veterans Health Administration issued a directive (2004-068), which provides operational policy for the accounting of costs associated with the billing and collecting of payments for health care services from certain veterans and private health insurers.

Recommendation: To accurately determine and report the cost to collect first- and third-party payments, the Secretary of Veterans Affairs should direct the Under Secretary for Health to provide guidance for standardizing and consistently applying across VA the accounting of costs associated with collecting payments from veterans and private health insurers.